Humala Changes 6 Ministers After Mine Turmoil Turn Deadly

July 24 (Bloomberg) -- Peruvian President Ollanta Humala
swore in six new ministers yesterday led by his former justice
minister as he seeks to jumpstart talks with protesters who have
blocked the country’s biggest investment project.

Humala took office in July 2011 vowing to boost spending on
the about 8 million Peruvians in the nation of 30 million living
in extreme poverty without jeopardizing $50 billion in mining
investments expected over the next decade. His Cabinet chief
Valdes failed to reach an agreement with opponents of the $5
billion Minas Conga gold project, including Cajamarca regional
government President Gregorio Santos, after six months of talks.

“It’s an acknowledgement by the government that they’re
having trouble addressing the issue of social conflict,” Aaron
Freedman, a senior analyst at Moody’s Investors Service, said
today in a telephone interview. “ Unless they can figure out
how to do that in a productive manner, it’s likely to have
negative implications” for Peru’s credit rating, he said.

Protests, Approval Rating

Valdes stepped down after protests against Newmont Mining
Corp.’s Conga project left five dead this month and forced
Humala to impose a state of emergency in the northern Andean
region of Cajamarca. Humala authorized Newmont to resume work on
Conga on June 23 after a six-month deadlock.

Humala replaced both his defense and interior ministers for
the second time in two months after police opened fire on
protesters in Cajamarca and arrested protest leaders including a
former priest.

Southern Copper Corp., Zijin Mining Group Co., Ltd. and
Bear Creek Min Corp. have all suspended work on mining projects
following protests by farmers concerned that their water
supplies could be polluted.

‘Pro-business”

“We’ve shown a complete willingness to take part in
dialogue and keep making progress,” Newmont Vice President
Carlos Santa Cruz told reporters in Lima yesterday after meeting
with a delegation of Catholic priests acting as mediators
between protesters and the government.

The retention of the finance, trade and mining ministers
will ease investor concern about possible change in economic
policy, said Daisy Johnson, an analyst at Bath, UK.-based risk
consultant firm Maplecroft.

“Humala’s continuing to pursue pro-business policies,”
Johnson said in a telephone interview. “These ministers have
done a good job as economic growth has continued and inflation
has cooled, which is beneficial to stability.”

Jimenez, 48, a former law professor and adviser to the
Organization of American States, will be a more moderate
negotiator than Valdes, a former lieutenant colonel who taught
Humala at a Lima military academy, said Fernando Rospigliosi, a
political analyst and former interior minister.

Market View, Polls

Former congressman and Deputy Justice Minister Pedro
Cateriano, also a lawyer, was named defense minister. Milton Von
Hesse, director of state investment promotion agency
Proinversion, was named minister of agriculture.

The sol dropped 0.2 percent to 2.6418 per U.S. dollar in
Lima, according to prices compiled by Bloomberg. The sol has
gained 3.6 percent over the past 12 months, the best performance
of 25 emerging markets currencies tracked by Bloomberg.

The yield on Peru’s benchmark bonds due in 2020 rose five
basis points to 4.71 percent, according to Deutsche Bank’s local
unit. The yield on the bonds reached 4.50 percent on July 16,
the lowest since they were first sold in 2005.

Lima’s General Stock Index slumped for a third session,
dropping 1.1 percent to 19,536.55 points.

Humala’s approval rating fell to 40 percent in July, the
lowest since he took office a year ago, from 45 percent last
month, daily El Comercio reported July 22, citing a poll by
Ipsos Apoyo.

The poll of 1,210 people, conducted from July 11 to July
13, has a margin of error of plus or minus 2.8 percentage
points, the newspaper said.

The Cabinet shuffle “highlights the instability and lack
of direction of someone who wasn’t ready to govern and has been
improvising with all these sudden changes,” Rospigliosi said in
a phone interview from Lima. “Humala has been hurt by his drop
in the polls.”